CPUC Opens Rulemaking to Modernize Rule 21 Interconnection Procedures

The California Public Utilities Commission (CPUC or Commission) has launched a new rulemaking to update Electric Tariff Rule 21 (Rule 21). This proceeding was initiated through an Order Instituting Rulemaking (OIR) adopted at the August 14, 2025 CPUC voting meeting, and seeks to modernize interconnection procedures in response to the rapid evolution of Distributed Energy Resource (DER) technologies, including battery storage and electric vehicles.

Rule 21 is the tariff that describes the interconnection, operating, and metering requirements for generation facilities seeking to connect to an investor-owned utility’s (IOUs)[1] distribution or transmission system, for interconnections over which the Commission has jurisdiction.  Rule 21 governs interconnections for: Net Energy Metering (NEM) facilities, non-export generating facilities, qualifying facilities intending to sell power at avoided cost to the host utility, customer-sited generation and storage (e.g., rooftop solar, battery systems), and DERs connecting to IOU distribution systems. Rule 21 does not apply to the interconnection of generating or storage facilities intending to participate in wholesale markets overseen by the Federal Energy Regulatory Commission (FERC). These facilities must typically apply for interconnection under either a FERC-jurisdictional Wholesale Distribution Access Tariff when connecting to the distribution system or the California Independent System Operator Tariff when connecting to the transmission system.

The OIR outlines eight preliminary topics for consideration:

• Electrical Independence Tests (Screens Q & R): Potential interim or long-term reforms to electrical independence processes to streamline transmission upgrade assessments and reduce delays.[2]
• Interconnection Processes: Improving IOU compliance with timeline benchmarks, refining dispute resolution (including the Expedited Interconnection Dispute Resolution process), and ensuring the IOUs’ proper use of Integration Capacity Analysis.
• Interconnection Pathways and Standards: Addressing technical requirements for non-exporting storage, vehicle-to-grid systems, and aligning Rule 21 with industry interconnection and equipment standards and smart inverter settings.
• Cost Sharing for Grid Upgrades: Developing frameworks for allocating upgrade costs among multiple interconnection applicants, including potential impact of upgrade cost sharing on FERC-jurisdictional Wholesale Distribution Access Tariff (WDAT) projects interconnecting on the same or related distribution circuits, and addressing cost responsibility due to sustained load reductions.
• Tariff Implementation Costs: Reviewing Rule 21’s fees, cost allocation rules, and other requirements that may impact or reduce costs related to implementing the interconnection tariff.
• NEM and Net Billing Tariff (NBT) Alignment: Potential reforms to harmonize definitions of “system size” and interconnection rules for non-export additions to existing NEM systems in response to recent NBT updates.
• DER Communications and Interoperability: Evaluating costs and standards for communications and interoperability of inverter-based resources, including distributed energy resources management systems and bidirectional communications.
• Coordination with WDAT: Ensuring consistency between Rule 21 and WDAT procedures.

The full OIR is available here.  Stakeholders may file opening comments within 60 days of the issuance of the order, and reply comments are due 20 days after the date to file opening comments.

[1] The IOUs under Commission jurisdiction include the Large IOUs—Pacific Gas and Electric Company, Southern California Edison, and San Diego Gas & Electric.  Rule 21 equivalent tariff rules apply to the three small and multi-jurisdictional utilities under Commission jurisdiction—Bear Valley Electric Service, Liberty Utilities, and PacifiCorp, d.b.a Pacific Power.

[2] Screen Q evaluates whether an interconnection request requires upgrades to the transmission system. Screen R evaluates whether an interconnection request is electrically independent of other interconnection requests earlier in the queue. If upgrades are found to be necessary under either screen, the interconnection request may be studied under the California Independent System Operator’s Transmission Cluster Study Process. (Rule 21, Sections G.3.a and G.3.b.).